What’s Next for Medicaid in 2021?

Medicaid has had two transformational moments since it was created by Title XIX of the Social Security Amendments in 1965. The Children’s Health Insurance Program (CHIP), first authorized in 1997, raised the upper income thresholds for low-income children and pregnant women, resulting in broad coverage expansion. And, in 2010, the Affordable Care Act (ACA) also allowed more people into the program. Starting in 2014, states could voluntarily extend coverage beyond traditional low-income enrollees, which were children, the elderly, people with disabilities, and some parents with dependent children. The ACA expansion brought in non-elderly adults without disabilities or dependent children, and standardized income eligibility thresholds across participating states, in most cases making them more generous. Thirty-eight states adopted the expansion, and it is estimated that 12 million Americans gained Medicaid coverage. Unlike CHIP, the ACA is a highly contentious and partisan policy for various reasons that have been well-documented.^[1] Now, in 2020, those long-standing political conflicts are coming to a head in the Supreme Court and in the US presidential debates, marking this year as another potentially substantial turning point.

The future of the ACA as a whole is uncertain. On November 10th, the Supreme Court of the United States (SCOTUS) will hear arguments that challenge the overall validity and enforceability of the ACA, based on the constitutionality of the (already defunct) individual mandate. The death of Justice Ruth Bader Ginsburg and the likely confirmation of federal judge Amy Coney Barrett as her replacement have ACA proponents worried. It is possible that SCOTUS could sever the mandate from the rest of the law, thereby preserving most elements, but a change in court composition introduces much unpredictability. If the Court allows the lower district court ruling to stand, Medicaid expansions, along with all other ACA provisions, would no longer be law.

The implications of invalidating the ACA are heightened by the global COVID-19 pandemic, which has claimed more than 216,000 American lives, sickened millions more, and impacted the economy. Specific to Medicaid’s income-based eligibility, enrollment in the program increases with unemployment, as more people experience poverty and lose job-based health insurance. Due to the countercyclical nature of Medicaid’s financing, in times of high unemployment, states face a mismatch of higher-than-anticipated Medicaid costs and lower-than-anticipated tax revenue.^[2] This situation will likely worsen the economic condition of many states, already besieged by closing businesses, civil unrest, and natural disasters. States may begin to look for ways to reduce Medicaid spending, even as more Americans are coming to depend on it.

The ACA challenge before SCOTUS, the COVID-19 virus, and budget threats to Medicaid all elevate the importance of the two presidential candidates’ health care agendas. Fortunately, both candidates have been very clear on where they stand. President Donald Trump campaigned on repealing the ACA in 2016 and his administration is supporting the lawsuit that would invalidate it. Former Vice President Joe Biden was a champion of the ACA, which later became known as “Obamacare.”

If re-elected, Trump has promised to replace the ACA with something better and more affordable, even “phenomenal.” However, no substantive details have been provided. The president’s vision for Medicaid can be inferred from the proposals and changes that have been implemented in the program over the past four years. The most far-reaching Medicaid policy of the Trump administration has been the Healthy Adult Opportunity (HAO) Section 1115 waiver formally introduced in January 2020.

Medicaid currently is an open-ended entitlement program; as health care costs or enrollments increase, the amount paid by the federal government also increases. The HAO would allow states to convert funding for the Medicaid non-disabled population into a block grant, offering states unprecedented flexibility to administer the Medicaid program and allowing them to reduce benefits and impose greater cost-sharing.  Federal payments would be tied to either a per-capita or aggregate cap, placing financial risk on states should enrollment or health care costs increase in an unexpected way but keeping the amount paid by the federal government fixed.

Biden’s health care agenda addresses some of the problematic issues that have emerged in the decade since ACA enactment. For one, the Supreme Court ruled the federal government cannot compel states to expand Medicaid. As a result, 12 states have still not done so. Biden’s plan offers free health insurance to would-be Medicaid eligible individuals in Medicaid non-expansion states. Coverage would be provided by creating a public option that resembles Medicare. Biden’s plan also increases the amount of subsidies lower-income families receive when participating in the state Marketplaces and raises the  threshold for subsidies to be available at higher incomes. The former policy addresses the coverage gap in which individuals living in Medicaid non-expansion states are too poor to qualify for subsidized Marketplace coverage (earning less than 100% of the Federal Poverty Level) but do not qualify for Medicaid. The latter policy addresses the sharp decreases in enrollment that occur when individuals move from Medicaid eligibility to Marketplace eligibility and when individuals cross the 400% FPL threshold at which federal subsidies end, the latter called the subsidy cliff. By making Marketplace coverage more affordable, Biden hopes to increase participation and reverse the rising trend of uninsurance seen in the four years of the Trump administration.

Much of a president’s influence over health policy comes through the appointments of leaders to key agencies, such as the Department of Health & Human Services (DHHS), the Centers for Medicare & Medicaid Services (CMS), and the Assistant Secretary for Planning and Evaluation (ASPE). While Medicaid is a state-federal partnership and states exercise considerable autonomy, it is administered and regulated by federal law and agencies. The individuals charged with implementing the president’s vision through their political appointments set the stage for a multitude of decisions that have nontrivial effects on the Medicaid program. States have the opportunity to apply for 1332 innovation or 1115 demonstration waivers, and most utilize these mechanisms to tailor their Medicaid programs to their particular needs or preferences. Political appointees have tremendous power over how Medicaid is administered at the state level by determining which policy elements will be approved or denied in a waiver request.

Under the Trump administration, CMS has approved personal responsibility waivers that require work as a condition of Medicaid eligibility, allow states to ask applicants about substance abuse during enrollment, and impose monthly premiums. CMS also has approved waivers to increase access to quality substance abuse and mental health treatment. Only one state has a waiver under review for transforming Medicaid into a block grant, Tennessee, but this application was submitted prior to the pandemic and prior to guidance issued about the HAO Waiver. The decision from CMS is still pending.

Under Biden’s proposals, states could apply for the opportunity to move individuals enrolled in Medicaid expansion into the public option, as long as they continue to contribute their proportional share of expenses. Pooling Medicaid beneficiaries across states holds the potential to leverage more purchasing power with insurers and providers than individual states may be able to negotiate. Biden’s Medicaid plan also calls for auto-enrolling individuals into Medicaid as they interact with other institutions (such as public schools) and antipoverty programs (such as the Supplemental Nutrition Assistance Program). Across Medicaid, program participation has always been much lower than estimated rates of eligibility, a problem called take-up that has been attributed to lack of information about eligibility and enrollment complexity. Auto-enrollment could go a long way toward increasing coverage.

In conclusion, the Medicaid program is likely to experience significant changes in the coming year. These changes may be precipitated by a SCOTUS decision unfavorable to the ACA, a subsequent response from Congress, a prolonged economic crisis resulting from COVID-19, or a change in presidential administrations and their key appointees. What would be most unexpected is for things to remain the same.

References

[1] Oberlander J. The ten years’ war: politics, partisanship, and the ACA. Health Affairs. 2020;39(3):471-478.
[2] Allen HL, Sommers BD. Medicaid and COVID-19: at the center of both health and economic crises. JAMA. 2020;324(2):135-136.

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